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IP Plays an Important Role as Key Economic Driver

Michi Iljazi

August 1, 2014

US Patent and Trademark Office HQ in Alexandria, VA

August is here and that means another vacation for Washington politicians. This month-long break comes at a time where there is quite a bit of work for them to do. One issue that has languished in Congress for quite some time is reforming the patent system and ensuring protection of intellectual property (IP). Protecting intellectual property should be a priority for the Federal Government, and while the Taxpayers Protection Alliance (TPA) is no fan of big government, on this issue even the Founding Fathers knew that protecting intellectual property was important enough to include it in the Constitution. All one needs to do is look at how large a role IP plays in commerce, and not just in the United States, but also around the world.

One of the biggest misconceptions is that protecting IP is a form of corporate welfare. TPA is acutely aware of the real definition of corporate welfare considering TPA’s tireless work to get rid of the Export-Import Bank and other blatant corporate welfare programs. But, protecting intellectual property ensures that creators of works are safeguarded against those who wish to steal their creative pieces.

The hope for reform has dwindled as the Senate Judiciary Committee was spearheading a bill that could have remedied the problems that the current patent litigation system contains. Sadly, just when things had been progressing, the legislation suffered a major setback. In late Spring of this year Kate Tummarello, writing for The Hill, detailed the collapse of patent reform efforts in the Senate:

Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) said weeks of negotiations on a compromise had reached a dead end and announced he was yanking the bill from the panel’s legislative agenda.

One person familiar with the negotiations said Senate Majority Leader Harry Reid (D-Nev.) told Leahy he would not bring the legislation to the floor due to objections from the pharmaceutical industry and trial lawyers.

The news out of the Senate was a disappointment to be sure, and the longer it takes for the rules governing patents to be reformed, the more harm that will be done to IP in the process. One recent example of how IP continues to be at risk and how that risk negatively impacts commerce is the study detailing how piracy still poses a major problem to industry. Writing for the Technology Policy Institute blog, Michael Smith was discussed ‘pre-release piracy’ and the effects it had on movie sales but also reminded readers of just how detrimental piracy in general in terms of business and sales.

This past week a DVD-quality copy of the movie The Expendables 3 leaked online three weeks before its planned U.S. theatrical release. According to Variety, the film was downloaded 189,000 times within 24 hours. As researchers, an immediate question comes to mind: how much of a financial impact could movie-makers face from such pre-release piracy?

The effect of piracy on the sales of movies and other copyrighted works has long been scrutinized, with the vast majority of peer-reviewed academic papers concluding that piracy negatively impacts sales. Indeed, in a recent National Bureau of Economic Research book chapter, my co-authors and I reviewed the academic literature, and showed that 16 of the 19 papers published in peer-reviewed academic journals find that piracy harms media sales.

Cleary there is a threat to IP that is real, and while elected officials waste time and taxpayer dollars there is growing consensus and mounting evidence that reforming the patent system and protecting copyright are the right direction in order to encourage innovation and economic growth. Just last year the American Consumer Institute released a survey on attitudes towards IP and it also detailed the positive impact to the economy. Speaking on a panel regarding the study Sandra Aistars, Executive Director of the Copyright Alliance, described some of the key findings:

Finally, Aistars introduced the perspective of the copyright industry. She heralded the high levels of support for IP protection as being support for simple common sense—copyright systems have incredible benefits, and are currently undergoing an update to become more streamlined, accessible, and up to date with current technology. A few statistics she introduced included that the copyright industry contributed about 11% to the US GDP, and that this produced 5.1 million jobs, with every 2 copyright employees contributing to another job someplace else in the economy. Of these employees, about 1 million are independent copyright owners and small businesses, a huge number that helps to dispel the myth of copyrights only serving big companies on the coasts. And to help all these innovative people involved in copyrights, Aistars pushed the idea that we approach the issues as partners who can reach a common ground, not two warring communities.

The importance of preserving IP and reforming the patent system is important for the economic growth of the country. The progress made in the Senate last spring was cause for some optimism and though reform seems unlikely in the near future, the need to put pressure on lawmakers to do something is now just as important as the issue itself. Hopefully the wait will not be too long because the economy, and the consumers and businesses that drive it can’t afford to wait.